Payments Bank has become the buzz word in Indian Banking scenario for the past 2 years and they hype is at the highest in 2018. As a large country with organized banking system, we have too many banks some of which are already due for consolidation. At this juncture, do we need another sub-banking system is a big question, although only time can answer this, a detailed analysis will help us to know the benefits.
What is a Payments bank?
Payments banks is a new model of banks conceptualised by the Reserve Bank of India (RBI) and are different from the regular bank.
What are the type of accounts they can provide?
Both current account and savings accounts can be operated by payments banks.
Can they accept deposits?
As payments bank, they are allowed to accept deposits but with restriction, which is currently limited to ₹1 lakh per customer. It may be raised by RBI at a later stage depending on the performance of the bank.
Can they issue Credit Cards?
No, these banks are not allowed to issue credit cards.
Can they issue loans or credits?
No, these banks cannot undertake lending activities and therefore are not allowed to issue loans of any type.
What are the other services can they provide?
Payments banks can issue services like ATM cards, debit cards, Net Banking and Mobile banking.
What is the basic criteria to be a Payments Bank?
Minimum Capital requirement is ₹100 Crore.
Promoter should hold at least 40% stake for the first 5 years
Voting right of any shareholder is capped at 10% (Ofcourse RBI can raise it to 26% later)
Any acquisition more than 5% requires RBI approval
Majority of the Bank’s board should consist of independent directors, appointed according to RBI guidelines
What are the technical requirements while operating ?
The banks should be fully networked from the beginning. 100% FinTech enabled
The bannks can accept Utility bills
25% of its branches must be in the “unbanked” rural area.
The bank must use the term “payments bank” in its name to differentiate it from other types of bank.
Why payments Bank is beneficial to India?
As 25% of the branches are to be in Unbanked rural location, it will take the Digital banking to every village in India. This will bring more funds into the system.
How’s it impacting Indian FinTech Scenario?
As the bank requires 100% networked branches & 25% of the branches to be in unbanked solution, the fulfilments of these criteria will automatically bring these villages into better digital connectivity and thereby a strong infrastructure. This increased need for building the IT, FinTech infrastructure will contribute to the steady and steep rise of the FinTech as a Industry.
How many applicants have received the licencse?
RBI have in-principle licenses to 11 players to lauch payments banks in India
Who are they?
Aditya Birla Nuvo
Airtel
Cholamandalam
India Post
Fino Paytech
National Securities Depository
Reliance Industries
Vodafone
Paytm
Tech Mahindra
Sun Pharma
How many licensees have launched their services?
Airtel M Commerce Services of Bharti Airtel and Paytm has launched and started their operations. Fino Payment bank and Aditya Birla Payment bank has launched their services yet to start full fledged operations. India post has launched their banking services India Post Payments Bank (IPPB) as on 1st September 2018. Cholamandalam Distribution Services, Sun Pharmaceuticals and Tech Mahindra have surrendered their licenses.
